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Gold confounds the experts
David McKay
Posted: Thu, 22 Feb 2007

[miningmx.com] -- WITH the gold price testing $680/oz, we compare the views of gold industry participants and watchers polled last month by Miningmx, and find that gold continues to confound best estimates of the experts.

CHRIS HART: Absa, senior treasury economist

Positive on gold. His “strictly personal belief’ is that gold will burst through its nominal high of $850/oz in the next two years.

“I watch the currencies. When there’s strength in the euro I immediately check what the dollar is doing. At the moment, there are structural issues however, so even though the euro is not strong the gold price is still gaining ground.

“Then there’s also the ‘looney left’, the reappearance of nationalism in places like Bolivia and Venezuela that makes finding and producing gold from some of the emerging economies harder to do. This basically emanates from greed.”

HELEN HENTON: Standard & Chartered Bank, banker

Bearish on gold in the short-term averaging $613/oz in 2007 but breaking out in 2008 to average $675/oz.

“The strength of the US dollar completely dominates the gold price. We believe gold will peak in the first quarter of 2007 as the markets anticipate further US Fed interest rate cuts. Thereafter, we’re in for a bout of dollar strength as the emphasis falls on growing the US economy. Expect gold to average $640/oz in the first quarter; $620/oz in the second; $590/oz in the third quarter, and $600/oz in the fourth quarter.”

NICK GOODWIN: T-Sec, gold analyst

Bearish on gold. Believes investors should beware of gold equities which won’t bottom out until Johannesburg’s gold index is around 1,400 points. “Then it’s a buy”. It’s currently at about 2,700 points.

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“The exchange traded fund is artificially holding the gold price higher. But it’s a helluva dangerous instrument because investors start believing gold is going up and when it doesn’t they become speculators. Jewellery demand is not good and recycling of gold from scrap is coming back into the market. And the gold shares just aren’t performing. That’s telling us something.”

PAUL WALKER: GMFS, executive director

Bullish. Thinks the gold price may push into the $670/oz region sometime during 2007 although unlikely to gain much further than that. In 2008, however, recent high of $725/oz could be reached.

“The dollar is only indicative of an investment climate that is currently favourable for gold. I take the broader view that there’s a fear out there that systemic risk is under-priced. As this fear of unknown downside hits, investment funds will seek protection by making changes in assets, like gold. Let’s not kid ourselves, gold is only a marginal player, but there’s a class of investor who is using gold as a hedge against all risk.”